Home prices in popular beachfront locations remain firm as the broader market slows, with some areas even seeing increases, according to new figures.
During the recent boom, many vacation hotspots saw price increases that far exceeded those in major cities.
Whangamatā, Akaroa, Mount Maunganui, Waihi Beach and Raglan, for example, all saw increases of more than 40% in the year ending November 2021, according to figures from Homes.co.nz.
But during the boom that preceded the global financial crisis (GFC), prices in many beach areas soared to new highs, only to be hit particularly hard in the wake of the GFC.
* Why Akaroa is the perfect place to catch up with friends
* The cost of shopping in this vacation hotspot
* Are vacation towns the new real estate hotspots?
CoreLogic says prices in half of the country’s suburbs have fallen over the past three months, but recent quote value figures reveal a handful of areas bucked the downward trend with price increases .
So is the downturn having a big impact on seaside real estate markets? And, if not, could it in the months to come?
New figures from CoreLogic suggest that prices in a selection of popular beachfront locations have not seen noticeably larger declines than in other areas, and that some are still seeing moderate price increases.
The area with the biggest increase is the South Island’s coastal city of Kaikōura, where prices rose 2.7% over the past three months to a median value of $595,300.
Prices in Whangamatā and Waihi in the Coromandel rose 1.6% and 1.7% to a median of $1.31 million and $672,350 respectively. At Akaroa in Canterbury, prices rose 1.7% to $934,600.
But prices held steady at Omaha in Auckland, where the median is $2.97 million, and fell 0.3% to $1.53 million at Mount Maunganui in Tauranga.
And in Paraparaumu on Wellington’s Kāpiti Coast, prices fell 0.6%, leaving Paraparaumu’s median at $897,000. The median of nearby Raumati Beach is $1.03 million.
Trade Me’s numbers tell a similar story for beachfront areas with enough listings to calculate average asking prices.
In Whangamatā and Mount Maunganui, prices in May are up from April and annually to averages of $1.66 million and $1.41 million, while in Raglan the average was 1. $18 million versus $1.14 million last May.
Demand in Whangamatā and Raglan also increased by 22% and 12% in May, compared to the same period last year.
Real Estate Institute Waikato spokesman Neville Falconer said buyer demand in areas with many vacation homes, such as Whangamatā, Waihi and Raglan, is being hurt by a slower market.
Prices in those areas have recently fallen in line with the national trend, but if employment remains strong and people keep their jobs, a massive property sale is unlikely, he says.
“Many owners have done well on the earnings front in recent years, and although it depends on their level of borrowing, if they are not too well equipped and can afford to keep their property, even if it is is a vacation home, they will be.”
Agents are still receiving requests from Aucklanders looking to move for lifestyle reasons, but the volume and urgency has decreased compared to last year, Falconer says.
“But the problem with beachfront areas is the lifestyle they offer, and the desire for that never changes. It takes a lot to shake it out of people’s system, and it provides some support for the quieter parts of the cycle.
Further down the line, Craig Pashby of Ray White Paraparaumu says business activity in the area he covers is far from in the catastrophic category.
The opening of Transmission Gully is helping attract new buyers, and the Kāpiti Coast has generally benefited from the boom in remote working with local cafes and shops booming, he says.
“There are currently about 10% fewer registrations than at the start of the year and, unlike the GFC, forced sales are very rare.
“Prices have however come down a bit and sales take longer because sellers can choose to accept the market-appropriate price now or suspend the sale. But they have a choice, which was not the case for many in 2008.
Pashby says the changes in the market are widespread and do not unduly affect any particular area. “People were surprised at how quickly it turned, but it’s a correction after a boom.”
With a slowdown comes increased risk and some markets are more vulnerable. But CoreLogic’s head of research Nick Goodall says it’s the areas that have been hot spots for investor activity that are most at risk.
“Rising costs of holding properties may cause investors to decide to sell an investment property, but people who have secondary properties like vacation homes are more likely to try to keep them.”
That means beachfront areas with lots of vacation homes are less vulnerable to a sudden, big sale, but face reduced demand, he says.
“With interest rates and the cost of living rising, few people are looking to buy a holiday home, so if someone needs to sell it can be difficult to find a buyer. This limits their options and they may have to accept a lower price.
It’s fair to compare the current downturn to the GFC, but there are key differences, and the strength of the labor market is one of them, says Goodall.
“Would rising costs force someone to try to make more money by selling their vacation home?” Probably not, if they stay employed and aren’t in dire straits.
But all of these factors impact the market, and reduced demand can potentially make a region more vulnerable, he says.